Cumulative Conveyances Trigger Uncapping: Michigan Supreme Court Endorses Gross-Transfer Counting for Entity-Owned Property Under MCL 211.27a(6)(h)

Cumulative Conveyances Trigger Uncapping: Michigan Supreme Court Endorses Gross-Transfer Counting for Entity-Owned Property Under MCL 211.27a(6)(h)

Introduction

In Resort Properties Co-Operative v. Waterloo Township (Mich. Sup. Ct., July 2, 2025, No. 166642), the Michigan Supreme Court affirmed, in lieu of granting leave, the Court of Appeals’ judgment upholding a taxable-value “uncapping” under Michigan’s General Property Tax Act (GPTA) for real property owned through a closely held cooperative corporation. The dispute centered on how to apply Proposal A’s “transfer of ownership” rules—specifically MCL 211.27a(6)(h)—when more than half of the ownership interests in a legal entity are conveyed across a series of private transactions within the entity, rather than in a single sale.

The petitioner, Resort Properties Cooperative, Inc., is a domestic nonprofit formed to hold title to a family cottage. During 2021, several members bought and sold interests, resulting in a series of conveyances that, when added together, equaled approximately 68% of the entity’s ownership interests. The Township of Waterloo treated those conveyances as a “transfer of ownership” of the entity under MCL 211.27a(6)(h), thereby uncapping the property’s taxable value. The Board of Review, the Tax Tribunal, and the Court of Appeals agreed. The Supreme Court majority affirmed, with Justice Bernstein dissenting (joined by Justice Zahra).

This decision resolves a recurring question for entity-owned real estate in Michigan: whether multiple, private conveyances of ownership interests in a corporation or other legal entity may be counted cumulatively (on a gross basis) to reach the statute’s “more than 50%” threshold for uncapping—even if the entity’s original owners retain a majority stake at all relevant times. The Court’s answer is yes.

Summary of the Opinion

The Supreme Court affirmed the Court of Appeals’ construction of MCL 211.27a(6) and (6)(h). The majority held that for property held by corporations, LLCs, and other legal entities, assessors may:

  • Aggregate the value of multiple private conveyances of ownership interests to determine whether “more than 50%” of the entity has been conveyed; and
  • Treat the crossing of that cumulative threshold as a “transfer of ownership” that uncaps taxable value, without tracing specific shares or netting out subsequent resales.

The majority grounded its holding in the statute’s text and structure, emphasizing the Legislature’s focus on “conveyances” of interests and the specific carve-outs the Legislature enacted for certain entities and types of trading. It rejected the petitioner’s “snapshot” or “net-change” approach as unmoored from the statutory text and administratively unworkable.

The dissent would have measured only the net percentage of ownership interests that changed hands relative to the original ownership at the start of the period. Because at least 52% of the entity remained in the hands of original shareholders throughout, the dissent argued that no more than 48% of the ownership interest was ever conveyed—and thus the statutory “more than 50%” threshold was not met.

Detailed Analysis

1) Precedents and Authorities Cited

  • Mich Props, LLC v Meridian Twp, 491 Mich 518 (2012) – Establishes de novo review for questions of statutory construction and the limited nature of appellate review of Tax Tribunal decisions (legal questions only; factual findings conclusive if supported by competent evidence).
  • Briggs Tax Serv, LLC v Detroit Pub Schs, 485 Mich 69 (2010) – Confirms deference limits in reviewing Tribunal proceedings.
  • Sun Valley Foods Co v Ward, 460 Mich 230 (1999) and Bush v Shabahang, 484 Mich 156 (2009) – Articulate core interpretive canons: give effect to legislative intent; read words in context; construe statutes as coherent schemes; avoid surplusage.
  • Wexford Med Group v City of Cadillac, 474 Mich 192 (2006) – Tax exemptions are narrowly construed because they upset the norm of equal taxation. The majority deploys this principle to resist expanding Proposal A’s “cap” by implication.
  • Klooster v Charlevoix, 488 Mich 289 (2011) – Describes Proposal A’s purpose (limit tax increases for the same owner; uncap on transfer) and holds that MCL 211.27a(6) is a “nonexhaustive list” of transfers that trigger uncapping.
  • In re Complaint of Rovas Against SBC Michigan, 482 Mich 90 (2008) – Courts may give respectful consideration to agency interpretations but must independently interpret statutes.
  • Bronner v Detroit, 507 Mich 158 (2021) (expressio unius) – Express inclusion of one exception implies exclusion of others; used to infer that, outside enumerated carve-outs, cumulative counting is permitted.
  • Belanger v Warren Consol Sch Dist, Bd of Ed, 432 Mich 575 (1989) – The term “includes” can be enlarging or limiting; here, consistent with Klooster, it is enlarging.
  • Zenti v City of Marquette, 329 Mich App 258 (2019) – Defines “transfer” by reference to Black’s Law Dictionary; supports the majority’s focus on the conveyance event itself.
  • In re Brackett Estate, 342 Mich 195 (1955) – Tax statutes require a practical construction that does not defeat the purposes of the act; invoked to support administrability and predictability for assessors.
  • WPW Acquisition Co v Troy, 466 Mich 117 (2002) – Cited by the dissent for Proposal A’s framework: taxable value is capped until ownership transfers.

2) The Court’s Legal Reasoning

The constitutional baseline comes from Const 1963, art 9, § 3: taxable value is capped until “ownership of the parcel is transferred as defined by law.” Proposal A thereby delegates the definition of “transfer of ownership” to the Legislature, which enacted the GPTA’s definitional framework in MCL 211.27a.

Three textual pillars drive the majority’s interpretation:

  1. The general definition (MCL 211.27a(6)) centers on conveyances. A transfer of ownership “means the conveyance of title to or a present interest in property….” This aligns the analysis with what is conveyed, not merely who holds what after a series of trades.
  2. The entity-specific rule (MCL 211.27a(6)(h)) ties uncapping to the quantum conveyed. For corporations, LLCs, and other legal entities, a transfer of ownership includes a conveyance of an ownership interest “if the ownership interest conveyed is more than 50% of the [entity].” The majority reads this to permit aggregation of multiple conveyances to determine when “more than 50%” has been conveyed—even if no single transaction exceeds 50%.
  3. Exceptions confirm the rule. Two carve-outs matter:
    • MCL 211.27a(6)(h)(ii) expressly disallows cumulative counting for certain “summer resort” corporations formed under 1897 PA 230 (MCL 455.1–455.24). Because the Legislature singled out those entities, the majority infers that cumulative counting is allowed for others.
    • MCL 211.27a(7)(l) excludes public trading of interests, even when more than 50% cumulatively trades. By expressly barring cumulative counting for public trading, the Legislature impliedly allowed cumulative counting for private trading like the transactions here.

Applying those principles, the Court held that petitioner’s members engaged in five distinct conveyances totaling approximately 68% of the entity’s interests. Under the statute’s text and structure, that is enough to trigger a “transfer of ownership” and uncap the property’s taxable value. The majority’s approach:

  • Counts the gross percentage of ownership interests conveyed across multiple private transactions, not the net change in ownership at a “snapshot” moment.
  • Does not require tracing which particular shares were sold (no “FIFO” or similar identification is required).
  • Recognizes that cumulative conveyances can exceed 100% when interests are repeatedly resold; the focus remains on the amount conveyed, not the running sum of who currently owns what.
  • Emphasizes administrability and practical implementation for assessors and boards of review, avoiding a rule that would require tracking “original owners” or retroactively netting transactions across fluctuating periods.

The majority also underscores that the decision is limited to entity-owned property; it “impacts the meaning of the GPTA” for corporations and other legal entities, not for individual homeowners and families who hold title in their own names.

3) The Dissent’s Competing Theory

Justice Bernstein (joined by Justice Zahra) advances a “percentage-of-ownership-changed-hands” test. On that view:

  • Because at least 52% of the ownership remained with original shareholders at all times, no more than 48% of the ownership interests could have been conveyed to new hands; therefore, the “more than 50%” threshold was not reached.
  • Counting conveyances on a gross basis (e.g., 48% purchased plus 20% later sold equals 68%) conflates shares traded with ownership interests transferred and yields “mathematical impossibilities” (totals above 100%).
  • MCL 211.27a(6)(h) directs courts to the percentage of ownership interests conveyed—not to aggregate share counts—and the controlling provision is the specific entity subsection, not the general definition in (6).
  • Cumulative counting is not foreclosed in principle; it is just limited to instances where more than 50% of the ownership interests move away from the original holders.
  • Reliance below on IRS “first-in, first-out” guidance is inapposite; identifying particular shares is unnecessary to decide percentage-of-ownership changes.

The dissent would reverse because, under its construction, the statutory threshold was never met on these facts.

4) Why the Majority’s Approach Prevailed

The majority’s holding turns on two statutory-inference moves coupled with administrability:

  • Textual focus on “conveyances.” The statute repeatedly uses “conveyance” and defines transfer by present-interest conveyances “substantially equal to the fee interest,” guiding readers to the act of transferring interests rather than to the net posture of ownership at any moment.
  • Express carve-outs support implied inclusions. The Legislature knew how to disable cumulative counting for particular settings (summer resort corporations and public trading). The absence of any general prohibition on cumulative counting, paired with those targeted exceptions, implies allowance elsewhere.
  • Practical governance. The majority is sensitive to the administrative burdens on local assessing units and the State Tax Commission. A rule requiring netting based on the identity of “original owners,” or an ever-shifting snapshot, would be harder to apply than counting conveyances as they occur and recognizing the threshold when crossed.

Impact and Implications

Who is affected

  • Closely held corporations, LLCs, partnerships, cooperatives, and other legal entities that hold Michigan real property.
  • Family cottage entities and other co-owned properties held in entity form (but not individuals holding title personally, which are governed by different provisions and exceptions).
  • Assessors, Boards of Review, and the Michigan Tax Tribunal applying Proposal A uncapping rules.

Practical consequences

  • Gross cumulative counting is now the operative method for private transfers. Multiple private conveyances of entity interests are aggregated toward the “more than 50%” threshold, regardless of whether original owners maintain control, and without netting later resales.
  • Uncapping trigger timing. The uncapping event occurs when the cumulative conveyed interests exceed 50%. Under MCL 211.27a(3), uncapping adjusts the taxable value in the calendar year following the transfer event (the dissent notes this timing; the majority’s order assumes the standard rule).
  • No share tracing required. Parties need not specify which “original” shares were moved. The assessment focuses on the cumulative percentage conveyed, not identification of lots or lots’ origins.
  • Notification duty. The entity must notify the assessing officer on the State Tax Commission form within 45 days after a conveyance that constitutes a transfer of ownership under subsection (6)(h). Practically, that means monitoring transactions and filing once the threshold is crossed by the transaction that takes cumulative transfers over 50%.
  • Structure matters. Entities organized under 1897 PA 230 (summer resort corporations) and publicly traded interests enjoy statutory carve-outs that preclude cumulative counting in those settings. Other entities do not.
  • Estate planning and succession. Families using entity structures to hold cottages or cabins should expect uncapping if cumulative private transfers exceed 50%, even across multiple intra-family transactions in the same or different periods, unless an enumerated exemption applies.

Open questions and compliance notes

  • Time horizon for cumulative counting. The opinion endorses aggregation of multiple conveyances and rejects “snapshot” netting, but it does not specify a temporal cutoff (e.g., calendar year versus multi-year). Assessors will likely maintain a running count over time until the threshold is crossed, consistent with the majority’s administrability rationale.
  • Sequencing and partial reversals. Because resales are not netted against prior conveyances, parties cannot “undo” an uncapping trigger by later transactions. Planning should anticipate the trigger as soon as cumulative conveyances exceed 50%.
  • Interaction with other exceptions in MCL 211.27a(7). Many person-to-person exceptions exist for individual homeowners (e.g., transfers between spouses, certain family transfers, etc.). Those do not apply to entity-to-entity conveyances unless specifically enumerated.
  • Documentation and tracking. Entities should maintain a ledger of all ownership-interest conveyances (percentage, date, parties) and monitor the cumulative total conveyed so they can timely file the required notice upon crossing the threshold.

Complex Concepts Simplified

  • Proposal A “cap” vs. “uncapping.” Michigan limits annual increases in taxable value to the lesser of inflation or 5% while the “same owner” retains the property. When a “transfer of ownership” occurs, that cap is lifted (“uncapped”) and taxable value resets to current market-based measures.
  • Entity-owned property and the 50% rule. If the property is owned by a corporation, LLC, partnership, or similar legal entity, the GPTA treats a “transfer of ownership” as occurring when “more than 50%” of the entity’s ownership interests are conveyed. This case holds that multiple private conveyances can be added together to reach that threshold.
  • Gross conveyances vs. net change. “Gross conveyances” means counting every qualifying transfer of interests as they occur and summing their percentages. “Net change” would mean calculating who owns what at the end of the day and comparing to the start. The Court adopts the gross approach for private transfers in entities.
  • Public trading and summer resort corporations. The Legislature excluded publicly traded ownership changes from counting toward the 50% threshold and, separately, barred cumulative counting for certain “summer resort” corporations. No comparable exclusion exists for closely held entities like the petitioner here.
  • Why “more than 100%” is not a problem under the majority’s view. The statute asks how much has been conveyed, not how much is outstanding. Interests can be conveyed, resold, and conveyed again; the running total of conveyances can exceed 100% over time, but that does not change the fact that, at the point the total conveyed exceeded 50%, a statutory transfer occurred.

Key Takeaways

  • The Michigan Supreme Court confirms that, for entity-owned properties, assessors may cumulate the percentages of ownership interests conveyed through private transactions to determine whether those conveyances exceed 50% of the entity’s interests under MCL 211.27a(6)(h).
  • No tracing of particular shares is required, and later resales do not “net out” earlier conveyances. The focus is on the quantum conveyed, not on who ultimately holds what at a snapshot in time.
  • Explicit statutory carve-outs—public trading and summer resort corporations—demonstrate that cumulative counting is otherwise permissible; entities outside those carve-outs are subject to the gross-conveyance rule.
  • The decision is limited to property held by legal entities and does not alter Proposal A rules for individuals who own homes in their own names.
  • For planning and compliance, closely held entities should proactively monitor cumulative transfers of ownership interests and be prepared to file notice once the 50% threshold is crossed, anticipating uncapping in the following tax year.

Conclusion

Resort Properties Co-Operative v. Waterloo Township establishes a clear, administrable rule for Proposal A’s 50% trigger in the context of entity-owned real estate: private conveyances of ownership interests in the entity are counted cumulatively, on a gross basis, to determine whether more than half of the entity’s ownership interests have been conveyed. The Court’s reliance on statutory text, targeted exceptions, and practical tax administration leads to an outcome that favors predictable application by assessors and minimizes information burdens that a net-change or original-owner approach would impose.

While the dissent urges a net-percentage method keyed to the identity and continuity of original owners, the majority’s construction—grounded in the words “conveyance” and “includes” and reinforced by the Legislature’s explicit exceptions—signals that uncapping will occur once cumulative private transfers pass the statutory threshold, regardless of ongoing control or later resales. Entity planners and local governments alike should recalibrate their practices and expectations accordingly.

Case Details

Year: 2025
Court: Supreme Court of Michigan

Comments